2021 (10) TMI 1205 - AT - Income Tax

Exemption u/s 11 - Whether CIT(A) is not justified in accepting the contentions of the assessee and not accepting the findings of the AO in violation of Rule 46A of the IT Rules? - HELD THAT - CIT(A) had called remand report from the Assessing Officer but the AO has not objected to the written submission filed by the assessee trust. Therefore, the ld. CIT(A) is fully justified in directing the AO allow exemption u/s. 11 of the Act. As regards the acceptance of submission of the assessee in violation of Rule 46A as claimed by the department, we find that after receiving the various written submissions and documents, the CIT(A) had called for the remand report and after getting the remand report, the explanation of the assessee was called for and the rejoinder was filed by the assessee. Therefore, it cannot be established that the CIT(A) has accepted the new evidence in violation of Rule 46A of the IT Rules. Therefore, we reject the grounds of appeal of the revenue.

Summary

Issues: Appeal against order allowing exemption u/s. 11, condonation of time-barred appeal, justification of accepting assessee's contentions, violation of Rule 46A of IT Rules.

Analysis:
1. Exemption u/s. 11: The AO disallowed various expenses totaling to ?34,58,752, claiming the trust was accumulating funds despite charitable objectives. The CIT(A) directed the AO to allow the benefit u/s. 11, emphasizing that surplus funds are permitted if activities are charitable and comply with Sec. 11(2) and Sec. 11(5). The AO's objections were refuted, citing precedents and trust's compliance with regulations. The appellate tribunal concurred with the CIT(A), rejecting the revenue's appeal.

2. Condonation of Time-Barred Appeal: The revenue's appeal was time-barred by 1510 days. The revenue filed a condonation petition citing restructuring and delayed filing. The tribunal, noting no opposition from the respondent-assessee, condoned the delay and admitted the appeal for adjudication.

3. Acceptance of Assessee's Contentions: The LD. CIT DR supported the AO's order, alleging the trust did not maintain proper accounts. However, no specific error was pointed out. The tribunal upheld the CIT(A)'s decision, noting no objections from the AO to the written submissions, justifying the direction to allow exemption u/s. 11.

4. Violation of Rule 46A of IT Rules: The revenue claimed the CIT(A) accepted new evidence in violation of Rule 46A. The tribunal found that the CIT(A) followed due process by calling for remand reports, explanations, and rejoinders, concluding that there was no violation of Rule 46A. Consequently, the grounds of appeal by the revenue were rejected.

In conclusion, the appellate tribunal dismissed the revenue's appeal against the order allowing exemption u/s. 11, condoning the time-barred appeal, justifying the acceptance of assessee's contentions, and rejecting the claim of violation of Rule 46A of the IT Rules. The judgment focused on the trust's compliance with charitable activities and the procedural correctness of the CIT(A)'s decision-making process.